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Chabahar Port & Impact on India's Business chances in Central Asia

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Following article on “Chabahar Port & Impact on India's Business chances in Central Asia” should give insight to you.

In February 2018, Iranian President Hassan Rouhani paid an official visit to India where Indian and Iranian governments inked nine agreements including the operational control of the parts of Chabahar Port to India for 18 months.Chabahar port, developed by Indian assistance, is located on the Gulf of Oman along the Makran coast in south-eastern Iran.

Significance of Chabahar for Iran

Chabahar port has a strategic importance for both India and Iran. Currently, the Bandar Abbas port handles 85% of Iran’s seaborne trade but since it is not a deep-water port and it can’t handle the cargo ships of 250,000 tonnage and above. Such ships had to dock at United Arab Emirates (UAE) and then cargo is transferred on smaller ships for Bandar Abbas port. As Chabahar is equipped to handle larger ships, it will reduce the dependency of Iran on UAE.

Iran also plans to transform Chabahar port into a transit hub for trade between northern parts of Indian Ocean and Central Asia and earn revenue in the form of transit fee.

Significance Of Chabahar For India

Pakistan had never allowed India to use its territory as a transit for trade with Central Asia and Afghanistan because of which India had to sign an agreement with Iran for development of Chabahar port to get an alternate route to Afghanistan and Central Asia bypassing Pakistan. India shipped first consignment of wheat to Afghanistan through Chabahar in October 2017. Chabahar port will cut the transport cost and time to Iran, Afghanistan and Central Asia by one third in the wake of Pakistan’s denial of transit route to India.

Chabahar is India’s first major overseas port venture and is seen as a counter to China’s development of the Gwadar port in Pakistan. Gwadar is located 90km away from Chabahar in Baluchistan province of Pakistan. It is developed by China to gain a direct access to Indian Ocean through Pakistan. In this way, Chabahar is also seen as Indian initiative to counter the Chinese influence in Indian Ocean.

Historically, the trade between India and Central Asian countries could not expand up to their potential due to the absence of viable routes. The proposed 7,200km International North South Corridor (INSTC) will provide access to the five Central Asian countries. Central Asia is the resource rich regions which is yet to be exploited. The expanding trade between India and Central Asia will not only help India but will also usher development in Central Asia.

The Hajigak region in Afghanistan is said to have largest deposits of iron ore in Asia. Seven Indian companies have already acquired the mining rights but the absence of viable trade route was a major obstacle in its development. With the operationalisation of Chabahar port, Afghanistan is also freed from its dependence on Pakistan.

Indian Industries Affected By Chabahar

Indian agriculture is expected to benefit from Chabahar as it will facilitate Indian agriculture exports to Afgnaistan. In fact, the first consignment of wheat was already sent to Afghanistan via Chabahar on October 29, 2017.

India had set up a urea plant in Chabahar catering to the needs of Afghanistan, Iran and Central Asia. Later, the companies engaging in agriculture machinery may also get benefited by the development.

Potential for growth of Indian mining sector is also evident from the fact that National Aluminium Company (NALCO) has signed an MoU to locate an aluminium plant in Chabahar. India is also contemplating connecting Chabahar with mineral-rich Hajigak region in Afghanistan.

As India is planning robust investment in infrastructure that includes construction of roads, railway lines as well the further development of Chabahar port, industries like iron and steel, cements and other infrastructure companies may get a big share in the pie.

As the infrastructure development gathers pace in the region, investment in supply chain management and logistics industry will also gain momentum.

Last but not the least, direct connection with energy rich Central Asia will go a long way in ensuring the energy security in India.

Chabahar had already started showing signs of operational success as there are unconfirmed reports that traffic is being diverted from Karachi to Chabahar. The port of Chabahar is 800kms closer to Afghanistan than the port of Karachi. Due to the proximity with Central Asian countries of Turkmenistan and Uzbekistan, it is called as ‘Golden Gate’ to these landlocked countries.

As India is aspires to be a global player, it has to expand its outreach in all the regions of the world. The Indian presence in Central Asia, Latin America and Eastern Europe is so far not commensurate to its ambitions. Both India and China are trying to expand their clout and as of now, China seems to be winning the race. Indian involvement in Chabahar is also seen as a measure to counter Chinese influence in Indian Ocean and Central Asia. Thus Chabahar is not just a transit trade port for Central Asia and Afghanistan but a turning point for Indian geopolitical ambitions in the region.